Solution to ageing population

Lee Kuan Yew on the Japanese and American economies. As quoted in the Straits Times:

Prospects for the American economy:‘There are many opinions on this, but I think the majority opinion, and one which I subscribe to, is that the recovery will not be V-shaped.

‘Consumers are heavily in debt. Their credit cards are unpaid and the values of their housing assets have collapsed. So they feel poor. Unemployment is growing and just beginning to slow down, but still very high.

‘So the consumer is not in a position to spend. Therefore the economy will just bounce along at 2 per cent, 2.5 per cent or 1 per cent for a few years, until optimism returns and unemployment is down, and they say, okay, tomorrow will be a sunny day, let’s buy.

‘But I think this time, they’re a bit more cautious, and the banks will be cautious in lending them the money. So we’ll have to put up with the slow growth.

‘Meanwhile, because China and India are growing, depending on the domestic market, more of them will export now.

‘Their neighbours, including Japan, South Korea, Taiwan and ourselves, are getting a lift which we otherwise would not get.

‘I think our position would be worse if China and India were not growing. But you can’t go back to what the Americans were doing for us because they were such big consumers.’

How he would advise young people in Japan to create better lives for themselves despite the ‘bureaucratic and rigid society’:‘I cannot advise them, I’m not a Japanese… but I do know the Japanese system, where if you are older and functioning, you are respected as a grand senior, a person who has gone through many crises in his life, commercial crises, economic crises, and he has learnt to be very cautious.

‘I think one way is to take the risk and leave younger people in their late 40s and early 50s to run things. They will have the animal spirits, they will dare to invest.

‘The seniority culture is a very deep-seated one. It will not change easily. That’s the problem with the Japanese political leadership.

‘All the LDP (Liberal Democratic Party) leaders are children of former LDP leaders and they’ve got to wait for a long time when they get up there. By that time, they’re also half worn out.

‘The Chinese watch other countries and do realise (the problems). Now they have an age rule: In Beijing, you retire at 65. Whether you are good or no good, 65 is the cut-off date. They still use you as an adviser in the back room, but meanwhile younger people come out. In the provinces, the senior leaders, party secretaries, provincial governors, they also retire at 65.

‘In the big and small towns, the mayors are now 40 years old, many with PhDs. So all around, you see young, dynamic people, educated and of a different generation and mindset. I believe you guys should study that and say, ‘All right, the youngsters have more energy, more drive, let them run things.’

‘The seniors may say, ‘Okay, but that’s dangerous.’ But don’t stop them, point out the dangers and let them go and you might have better results.

‘We have done that. We also have a rule. I’m the exception to the rule but…I’m not doing the work! I’m just forecasting, I’m the radar over the horizon. And work is being done by younger people in their 40s and 50s.

‘They have the energy, drive and understanding of the contemporary world, and also link up to the younger generation of voters.

‘I don’t know if Japanese society can change that quickly, so I will not give any advice.’

How Japan’s new government can learn from Singapore’s experience in bringing in immigrants to sustain its economy:‘I think there has to be a radical rethink (by Japanese society on bringing in new immigrants, potentially diluting or complicating Japanese identity). And it is more difficult for Japan because your population is 120-something million. You cannot just bring them in.

‘Our workforce is about three million Singaporeans, one million foreigners. So one-third of our workforce has been increased by foreigners. Therefore the economy is bouncing. If we chase the foreigners out, one-quarter of the Japanese companies will be leaving because there’ll be a shortage of skilled workers…

‘Suddenly, we will find that all the restaurants, theatres and everything will be emptier by one-third, and will close down. As it is, despite the recession, you see that there is a full house everywhere you go…

‘And we tell the people: If you don’t want them, you don’t tolerate them, what will happen to your job? The companies won’t come in, they will be short of people. So, like it or not, that’s the way we have to go.’

On America’s key role in global economic recovery:‘America must recover. It is still the world’s largest economy and consumer. Yes, China has 1.3 billion people, but Chinese consumption is one-sixth of American consumption. American gross domestic product is 72 per cent consumer-based. The Chinese economy is about one-fourth or one-fifth the American economy, and only 37 per cent is consumer-based. They all keep their money with them in case they get sick and have to see the doctor.

‘So the Americans are hoping that the Chinese will have social security support for medicine, for unemployment and so on, and will spend his money instead of keeping it for an emergency.

‘The Chinese leaders understand that, but they are very cautious because they have 1.3 billion people. If you start giving subsidies for health, you end up with a very big hole in your budget.

‘The Americans want the Chinese to consume more, export less and raise the value of the renminbi. But the Chinese are scared to do that because they will have unemployment and the cities will suddenly have riots.

‘So this is a very big problem for the world. There’s a misalignment of the currencies. If the Chinese do not revalue, the Asian currencies cannot revalue. If we make our currency cheap and China stays as it is and follows the American currency down, then we will run into trouble.

‘So, this is a deadlock. I don’t know, I suppose over time, the Chinese will find a way to gradually reduce their exports and increase domestic consumption, which they know is necessary.’